FRM Update

December 4, 2017

Treasury yields moved higher last week and mortgage yield spreads were slightly wider versus Treasuries, but remain historically tight. Mortgage rates rose and mortgage applications fell from a 7.7% drop in refinance activity, which has fallen ten of the last twelve weeks to historically low levels. The FHFA announced the new baseline mortgage conforming loan limits for 2018.






CMO spreads tightened in various types of structures last week, while activity in CMOs slowed compared to recent levels, which has been elevated over the past month. Investor focus was primarily in shorter PAC structures offering extension protection and approximately 2.5% yield and 2.5-year average lives. Full coupon front sequential structures off of 30yr 3.5% collateral (“3.5 squared”) remained popular with financial institutions with wider spreads and was in better supply than many shorter structures. Odd lot cleanup activity has also increased as investors approach year-end.



Mortgage Rates and Refinance Activity




Housing related data released last week was generally strong and higher than expectations.





Dan Stimpson, CPA

Senior Vice President

Vining Sparks

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